Friday, December 5, 2008

Contracts are just the begining: Its still gonna cost you

A contract, even a good contract, is still just a piece of paper. No contract will win a lawsuit for you. A contract is “an exchange of promises for valuable consideration enforceable in a court of law.” A good contract just increases your odds of winning a lawsuit, it does not replace one. This is where things get tricky and hard choices must be made. If you want to enforce that contract you slaved over to perfect, you will have to hire a lawyer or figure out if your contract is so self-explanatory that no judge could find against you--which is about as likely to happen as me actually posting daily.

As previously explained, contracts need to have certain elements in them to be valid. Once you have a valid contract and the other party does not perform, they breach the contract, but you still only have a piece of paper. Now you have to do the hard part which is figure out how to enforce that contract without ending up in the hole. Do you need a lawyer or not? Once again, it depends.

The field of Remedies is just as complicated as the field of contracts. If your contract does not state exactly what the remedy will be, called liquidated damages or, duh, remedies for breach, then you need to figure out what you want. That sounds simple, but its not. Let’s do a hypo, shall we?

Danny Jumpboy buys a horse that will be imported from the state of Oblivion to the State of Confusion. Danny goes to try the horse, has a PPE done and decides to buy horse and have it shipped back to Confusion. Horse needs to have a health certificate and an updated Cogins, so Danny writes a check and has the sellers sign an excellent contract that covers any possible eventuality. Danny has been dealing in horses for years so he has learned the hard way to put all kinds of stuff in his contract—if its happened to him or someone he knows its in there. Seller does not have horses registration papers but promises in the contract to send them along as soon as they arrive.

Danny goes home and awaits for horse to be delivered. I week later horse arrives sound and in good health. Great, thinks Danny, I am all set to train and re-sell horse. Danny starts training horse and in just a few months he has a good offer on it. Danny is thrilled .Buyer Vets horse and wants to pay 3 times what Danny paid for horse. But buyer wants the papers. Buyer only wants to buy a registered horse and Seller still hasn’t sent the papers. Danny calls Seller and demands the papers. Seller says she still doesn’t have them. Danny invokes THE CONTRACT and Seller says. . . So? Sue me. Now what does Danny do?

Danny has no idea what to do. He has this wonderful contract that was supposed to protect him. Seller should know she will lose in court and just fold! NOT FAIR! We can’t blame Danny for feeling this way. He did his job and had a good contract. He shouldn’t have to pay for a lawyer to enforce that contract. But Danny forgot one thing: a contract is an agreement enforceable by law. No court, no law. It’s a civil matter so there are no free enforcers hanging around at the other end of a 911 call.

Danny calls a lawyer. Lawyer tells him yes, the contract sounds good. What do you want? Danny doesn’t know what he wants. He wants JUSTICE, he wants FAIRNESS, he wants REVENGE! That’s nice says Lawyer, but what do you want me to do? How much money are you out? It’s a contract case. We are not here for justice or fairness or revenge. We are here to make you in the same position you would be if the contract had been completed. What difference do the papers make to the completion of the contract? And please write me a check for a $5,000 retainer.

Danny freaks. $5,000??!! $5,000?!! The horse is only worth $10,000 and he already has $3,000 into it in care and vet bills and shipping. Without the papers he can only sell it for $7,000 He’d be in the hole! Wasn’t this what a good contract was supposed to avoid? That depends. Does Danny need a lawyer and what does Danny really want the court to do?

Does Danny want to rescind the sale and get his money back? Does Danny want the papers? Does Danny want the money he lost on the sale due to no papers? Danny decides he just wants the papers. He checks out the limits on small claims court in Seller’s state. He calculates the filing fees and how much it will cost him to travel to Oblivion and spend the day there for court. He figures out it’s a lot less then $5,000. He just wants a judge to tell Seller to deliver papers or suffer some consequence for not doing so. If Danny’s contract is really good he may just decide to do that. Danny will have to read up on the court rules and find out how to serve Seller court papers, but Oblivion has all this info posted on a nice website. Danny decides to do it himself.

Danny files the complaint, has Seller served and awaits his court date. In the interim, Danny receives a letter and court papers from Sellers attorney saying the case should be dismissed for improper venue and lack of personal jurisdiction and a demurer and a rule 12(b)(6) motion. To which Danny properly responds. . WTF?! Danny has no idea what all this means or how to respond to it. He calls the court clerk and asks her. Sorry, she says, we cant give out legal advice. You need to hire a lawyer. So once again Danny is out shopping for a lawyer, this time in Oblivion, only to find out those lawyers charge even more and now they want a $10,000 retainer. What did Danny do wrong?

Danny didn’t do anything wrong. Its just unfair and expensive to assert your legal rights. You get every bit of justice you can pay for. If Danny had filed in a State where small claims courts do not allow lawyers he would have been fine with his wonderful contract. The contract would have made it much more likely then not he would prevail. If Danny had a claim in some other sort of law like Torts he may have been suing for enough money to get a lawyer who would work on contingency. But in a relatively small contracts case it’s not worth it for lawyers to work for a share of the winnings because the winning are the actual damages—what Danny is out. Even if Danny included attorneys fees in his contract he would only collect if he won—so how many lawyers will risk that gamble? Some. If I was looking at a very good contract I would. But not all lawyers would and not if the contract is less than solid or if the facts are less than obvious.

Danny has a good case and will probably win. However, he still needs to face a court and argue his case effectively. It can be done. Danny could have googled the terms in the answer and responded to them or learned enough to get he judge to decide, but Danny wasn’t aware of the basic truth about contracts—they are not written for either party, they are written to anticipate and frustrate opposing counsel’s arguments. It’s not what you do or do not mean in a contract that matters, it’s what small opportunity for weaseling out of he contract another lawyer will find that matters and how expensive it is to enforce it.

Danny might be completely in the right, but if he wants to enforce his contract he either has to spend considerable time learning or pay for a lawyer that already knows. On the bright side he needs to learn a whole lot less if his contract is good and he just needs to respond to a confusing motion or answer. On the less bright side there is no way for Danny to avoid this no matter how well his contract is written. Seller should have to perform and Seller should be ashamed, but its funny how people who cannot afford to complete their contractual obligations somehow manage to afford legal counsel when they breach.

Danny could get lucky and Seller hires no lawyer and the judge looks at the contract and orders seller to deliver papers. Danny could get lucky ad Judge sees through Sellers lawyers attempt to scare Danny off. Danny could get lucky and Seller immediately complies when faced with actual court papers. But none of this is really luck—it’s a consequence of Danny taking the time to have a contract that could win in court! Because that's the goal. A good contract may not avoid litigation, but it sure makes it more expensive for the person who should lose. It takes Sellers lawyer 10 times as many hours to find a weakness in Danny’s contract then Danny’s lawyer charges to simply show up in court an argue the contract. A good contract avoids litigation simply because there aren’t that many lawyers who can find fault with a rock solid agreement and those that can cost more then just settling.

So, the moral is?1) figure out what you want and if it is under the small claims court limit in you state.2) Figure out of litigation is really going to gain you anything but satisfaction.3) Figure out if there is any other way to solve your problem besides court.4) Figure out how to avoid any potential future snags by limiting the things that can go wrong and must be litigated to correct.5) If your cost benefit analysis warrants hiring a lawyer then remember: That good contract is worth many many hours of your lawyers time. It wasn’t all for nothing, it means you should win in the end and be compensated for all your damages, including attorneys’ fees.

About Me

I am a newbie attorney setting out on an adventure in Animal Law. I am not the comedian. That's another Sara Silverman. I am much older than you imagine and actually went to a good law school. It's not their fault I can't spell. Nothing in this Blog is intended to be legal advice or should be taken as legal advice. If you have a legal problem, consult a licensed attorney. Nothing in this blog is meant to be an advertisement and should not be viewed as such. I am not here to solicit your business. If that worked I would not have time to blog. I can be reached at HonorLaw@gmail.com. Comments and corrections are welcome, praise is even better:>
That's not me. Its my dog. He is my paralegal.